The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 22/05/01

Transcript No. 2001/059

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Interview by Katherine McGrath, ABC Radio, PM
Budget Lock-Up, Canberra
Tuesday, 22 May 2001
8.22 pm

SUBJECTS: Budget, Election, Building Industry, Surplus, Self-Funded Retirees, Child Care, Pensioners, Motor Industry, Unemployment.

McGRATH:

Treasurer Costello, your sixth Budget, on an election footing now, ready for an early election perhaps in the start of the new financial year?

TREASURER:

Well, it’s up to the Prime Minister when the election’s held. It can be any time from now until Christmas. But obviously we want to be prepared but we are putting down a Budget which continues responsible economic management. It introduces new benefits for older Australians, invests in our health system, it rebuilds Australia’s defence forces and it cuts tax as well.

McGRATH:

Well if we look first of all at the forecast that this Budget is based on, growth of 3.25 per cent by next financial year with a strong US economy and an Australian dollar around 52 cents US, now if they change at all, this Budget won’t be able to deliver?

TREASURER:

I don’t think the exchange rate is part of the equation because we just use the exchange rate at the time. Yes, it would be good for us if the US economy strengthened. The US economy has been weak since last year and that has affected us. But our exporters have managed to maintain a footing in international markets. We’ve had a one-off effect on growth from the housing construction industry and that’s going to strengthen with the First Home Owners Scheme of $14,000.

McGRATH:

Yet the building industry is in trouble at the moment. The HIH situation has made that even worse. If building doesn’t rebound I mean this forecasts a growth in public housing, in housing construction?

TREASURER:

Oh, well, housing construction will rebound.

McGRATH:

Definitely?

TREASURER:

Oh, there’s no doubt about it. In the course of this year and into next year it will rebound supported by $14,000 First Home Owners Scheme and lower interest rates. And housing affordability is now as good as it’s ever been and it will support a very strong return to housing construction. I don’t think there’s any doubt about that.

McGRATH:

So you’ll more than eat your hat if it doesn’t happen?

TREASURER:

I think everybody agrees that that’s what’s going to happen. I don’t think there’s any great controversy about it.

McGRATH:

Now if we look at the surplus, you’re coming in with a surplus of $1.5 billion, that’s a billion above average expectations. Do you think the markets will be happy with that?

TREASURER:

I think it’s responsible. What we’ve managed to do in the Budget is we’ve managed to budget for tax cuts next year. We’re abolishing Financial Institutions Duties, stamp duties on shares, we’re also cutting company tax. And we’re cutting tax for self-funded retirees. So we’ve managed to cut taxes and still produce a surplus. A fifth consecutive surplus since the Budget was, since the Government was elected and I think that’s consistent with good economic management.

McGRATH:

Well if we look at older Australians first of all, the self-funded retirees, at the start of the next financial year depending on how quickly they do their tax return they’re going to have money in their pocket. Are you hoping they’ll feel good about that, ready for the next election?

TREASURER:

Well I think they’ll be happy that they’ve got a cut in tax, I’ve never known anybody that wasn’t happy about a cut in tax.

McGRATH:

But the timing of it all is going to be, you know, it’s a very quick one, it’s retrospective to the start of this financial year.

TREASURER:

Yeah, this is a retrospective tax cut.

McGRATH:

Vote winner?

TREASURER:

I can’t remember too many retrospective tax cuts. This is a tax cut which we’re going to legislate now to apply from 1 July last year.

McGRATH:

Well as you’re saying the self-funded retirees will obviously be happy about that. There’s also the change in the tax-free threshold. However those who aren’t self-funded retirees, other Australians, middle income Australians, Australians with young families, there’s nothing in this for them?

TREASURER:

Oh look, I think the best thing you can do for families, by the way is to keep their mortgages low. And we've reduced interest rates on home mortgages from 10.5 to 6.8 per cent.

McGRATH:

But there’s nothing obviously by further way of tax cuts for them or cuts to child care?

TREASURER:

Well, there are no cuts to child care. There are increases in child care places which I think they will welcome. But there are cuts for them. Every family pays Financial Institutions Duty every time you put money into the bank or pay money off a credit card or pay the mortgage, you’re taxed.

McGRATH:

But families are concerned, just as an example, about the high cost of child care places in child care centres, that’ll still be the same come 1 July next financial year?

TREASURER:

Well, the cost of child care under the New Tax System has actually been reduced by two measures, one is it’s tax free, secondly we increased family benefits for all families and if you are a family with young children, and people know this from 1 July last year, you’ve been getting quite a substantial increase in family allowance.

McGRATH:

Now the $300 for pensioners, it’ll be a one off payment. In the run up to the Budget, pensioner groups were saying they wanted that to be an annual payment.

TREASURER:

Oh, look I’m sure that when people are staking out their positions, you always stake out your positions for the absolute maximum. But this is $300 to be paid before 30 June, bear that in mind. It’s to be paid before 30 June unless the Labor Party tries to delay it. There are 2.2 million Australians that will benefit from it. It’s not taxable. If you happen to be a pensioner couple you both get it. It is $300 for each pensioner. I think it’ll be warmly welcomed.

McGRATH:

Now looking at small business and the full input tax credit for cars, a windfall of possibly over $3,000, why did you bring that forward? It wasn’t forecast, hadn’t been lobbied for, why do it?

TREASURER:

I think it’ll be good for business. It means that a business can buy a car with no tax. And they used to pay 22 per cent wholesale sales tax. It means from midnight tonight they pay no tax. Truckies who are buying a new rig pay no tax. That’ll be good for them and what’s more it’ll be good for the motor car industry and all the people who rely upon it for their income.

McGRATH:

Treasurer, just one last quick question. Unemployment rate would go up though from 6.8 to 7 per cent?

TREASURER:

Yeah, we think that unemployment will average around 7 per cent this year. That is that it’ll be around current levels and that’s because the economy has slowed in the first part of the year, but as the economy grows again we would expect next year that unemployment will keep falling. Now bear this in mind, at current levels, there are 820,000 more Australians in work than when the Government was elected. The unemployment rate was never as low as 7 per cent before this Government was elected and in historical terms coming off a peak of 11.3 per cent, it’s too high, but it’s a lot less than it was.

McGRATH:

Your last Budget?

TREASURER:

Oh well, let’s get through the sixth before we start thinking about the seventh.